Immediate, short-term lending sounds great – just a little something to hold you over until the next paycheck at which point you can definitely give that money back, right?
But what if you can’t repay the loan on time?
Payday loans were never meant to last beyond a few weeks and if you miss a payment, it can end up costing you big time. If your circumstances have changed and you’re going to miss a payment, here’s what to know:
Charges and Interest
You’ll be charged a maximum of £15 default fee and up to 0.8% interest per day. This caps off at needing to repay twice what you borrowed.
Lenders can only try to make money from your bank account through a CPA (continuous payment authority) twice and can only take the full amount – no partial payments.
If you need the full amount towards other payments such as rent or bills, you must contact your bank to cancel the CPA at least 24 hours in advance.
The short-term lender may offer to rollover your loan to the next month (likely with some extra charges), however, this can only be done twice. After two rollovers, you need to be prepared to pay back the loan plus any additional fees and interest that have accrued. If offering you a rollover option, the lender should also direct you to free advice services that can help you devise better ways to pay back the loan.
Communication is Key
If you’re canceling the CPA, you should let the lender know and communicate with them frequently as you work on developing a repayment plan. Keep track of all communications with the company whether it is initiated by you or them. Having a clean record will help if the lender is acting inappropriately or harassing you regarding repayments.
Get Advice
There are many free/independent debt advisers such as Stepchange, National Debtline, or Citizen’s Advice, which can guide you on repaying debts. They may assist you in creating a debt repayment plan that helps you manage all the bills you need to cover.
If you communicate this to your lender, they must give you some time to come up with a plan before going to debt collectors so, as always, be communicative with your lender.
Know Your Rights
Office of Fair Trading (OFT) irresponsible lending guidance outlines appropriate behaviors for lenders, which includes patience and tolerance. You should also check what trade body your lender is part of if any. These bodies will have further guidelines for how lenders are expected to treat customers who are struggling to handle repayments.
If you truly feel the lender has not met the expectations outlined, you can file a complaint. This is where the record of communication will come in handy, as this would be needed to establish the grounds for complaint. These complaints are often routed through the Financial Conduct Authority first and then a Financial Ombudsman if they still cannot be resolved.
